1990 (12) TMI 146 - AT - Income Tax

Tribunal upholds CIT(A)'s decision canceling penalty under Income-tax Act

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to cancel the penalty imposed by the Assessing Officer under section 273(1a) ... Failure To Pay Advance Tax, False Estimate Issues:Penalty under section 273(1a) of the Income-tax Act, 1961 - Deletion of penalty by CIT(A)-XIV, New Delhi - Disparity between estimated income and assessed income - Justification for estimating income at a lower figure - Application of mind by Assessing Officer before levying penalty - Burden of proof on revenue to establish the estimate was untrue - State of mind of the assessee when filing the estimate - Material basis for estimating income - Knowledge or belief of the assessee regarding the accuracy of the estimate.Analysis:The appeal pertains to the deletion of a penalty imposed under section 273(1a) of the Income-tax Act, 1961 by the Assessing Officer, which was subsequently cancelled by the CIT(A)-XIV, New Delhi. The penalty was imposed due to a disparity between the estimated income and the assessed income, with the Assessing Officer alleging that the assessee knowingly furnished an untrue statement of advance-tax payable. The assessee, a registered firm, had estimated its income at Rs. 3 lakhs for the relevant year but filed a return declaring an income of Rs. 5,59,010. The assessment was made at Rs. 5,56,015, leading to scrutiny of the estimate and the justification for the lower figure. The Assessing Officer contended that the estimate was knowingly inaccurate, citing discrepancies and reliance on previous court decisions to support the penalty imposition.The counsel for the assessee argued that the Assessing Officer did not apply his mind before levying the penalty and failed to consider the explanation provided by the assessee. The counsel relied on court decisions emphasizing that the revenue must establish that the default was without a reasonable cause and that rejecting an explanation as unsatisfactory does not justify penalty imposition. The basis for the estimate of Rs. 3 lakhs was explained by the assessee, including factors such as previous year's income, turnover, and an accounting error regarding an escalation claim. The counsel highlighted the need for the revenue to prove the estimate was untrue to levy the penalty under section 273.The Tribunal analyzed the contentions of both parties and referred to relevant court decisions to determine the legal principles governing penalty imposition under section 273. It emphasized that the word 'estimate' implies approximation and does not necessitate accuracy. The Tribunal reiterated that the burden of proof lies with the revenue to demonstrate that the estimate was knowingly false. The Tribunal highlighted that the state of mind of the assessee at the time of filing the estimate is crucial, and subsequent events may not be determinative unless they were foreseeable at the time of filing. Applying these principles to the case at hand, the Tribunal concluded that the penalty was unwarranted as there was no evidence to suggest that the estimate was knowingly untrue or that the assessee had reason to believe it was inaccurate.In light of the above analysis, the Tribunal dismissed the appeal of the Revenue, upholding the decision of the CIT(A) to cancel the penalty imposed by the Assessing Officer.